The Mortgage Market Review (MMR) was brought in by the FCA and is in practice from 26th April 2014. The aim is to avoid a repeat credit crunch caused by over and responsible lending in the mortgage market.

What is the Mortgage Market Review?

It means that Financial Advisers will not be able to provide services on a Non-Advise basis. All IFAs will need to hold a relevant qualification. This means there will be better qualified IFAs, and the lack of competition should make this service profitable and worth it for the best IFAs. Overall this is better for people buying property as they will get better advise.

For Lenders: They are now fully responsible for assessing someones ability to pay back a mortgage and affordability. Therefore they will scrutinise income and expenditure to the finest detail.

Repayments and other commitments

The exact details you are asked for will vary between lenders, but you should expect to discuss your regular spending in all these areas.

MMR could be responsible for the surge in the housing market in recent months. Due to the fact that the lending process will be longer and more indepth, potential buyer will have rushed buying to get their transactions complete prior to these new rules coming in place.

What does MMR mean for Buy to Let?

It is still unclear if these rules are applicable for Buy to Let investments, especially as in most cases the loan to value is lower and mortgage payments are intended to be paid with the rental income.

Please comment if you have any further information in relation to Buy to Let impact.

Chancellor George Osborne today showcased the UK Budget for 2014. The main question is how will it impact the UK property market and effect you, the investor. Points of interest are Stamp Duty, Help to Buy, new housing, savings and taxes.

Stamp Duty

Nothing much changes for the average private homeowner, or small time landlord. The big announcement and change comes to close a loophole that many foreign investors used to avoid stamp duty by buying their properties through company ownership. Now there is a 15% stamp duty on purchases over £500,000. This will severely target foreign owned properties in particular in London and South East.

THOUGHTS – Will foreign investors now just flood the UK commercial property market? So is it a good time to get in now and sell in the near future?

Help to Buy

The equity loan scheme known as Help to Buy has been extended on new homes until 2020, with the aim to fill the shortfall in housing and encourage lending from banks and building societies.

In reality this will mean that the construction industry will be boosted until 2020 at the expense of young buyers, who end up buying an inflated prices, and find themselves in a lot of debt. This will keep pressures on house prices up until 2020 too. For the investor it means, get on the property ladder today or expand your portfolio, and if you want an exit do it before 2020. It also means new builds that are eligible for the scheme will be considerably higher priced than old builds, however this will drag the prices of old builds along too.

No mention of any extension to Help to Buy 2, the scheme that was available for non new builds up to £600k.

Housing supply

Ebbsfleet Garden City – 15,000 new homes to be built near the Ebbsfleet international rail terminal, to create a commuting hub. As PropVestment advised a few years ago Ebbsfleet was an investment hot spot and it will only increase more now. With great transport links it will become a thriving part of Kent. However we think the area will now be priced in.

Brent Cross and Barking Riverside in London will also receive new developments and improvements to help aid the capitals housing problems.UPDATE – There will be 11,000 new homes in Barking Riverside and up to 10,000 in Brent Cross. The regeneration of the infamous Grahame Park estate near Brent Cross will also be brought forward.

Right to build – New scheme to help people build their own homes. £1.5m allocated, that is pittance really, how many can be supported through this? Although it does sound like an interesting concept.

The chancellor’s target is 200,000 new homes to be built, however many critic suggest that this is still not enough and the housing supply deficit will keep growing. This means by simple economics demand will continue to out strip supply and prices will keep on rising.

Savings & Taxes

A few points are that the zero rate and 40p rate thresholds will rise, increasing affordability. ISA thresholds are increased to £15,000 per person and there are a few other measures to encourage savings. This could have impacts either way, one way is that it will encourage savings so people will be able to build up deposits for buying a property. On the counter if they have saved into ISAs that they do not want to break, it could mean that people will be more reluctant to invest into property. It will depend on person to person.

How will #Budget2014 impact the PropVestor?

For the traditional investor it is a fairly positive budget and it will help discourage corporates and foreign investors with the Stamp duty ruling. This will leave more opportunities for private UK based investors.

Help to Buy is contentious but it will keep pressures on house prices until the end of the decade.

Is the role of the Estate Agent changing?

Over the last few years since the bursting of the property bubble in 2007 to now the role and business model of the estate agent has changed dramatically. We will discuss a few themes from the rise and reliance of the internet in property. Most prominently the rise and almost necessity of agents to list upon Rightmove and Zoopla. Are relationships with your agent still as important? The rise of volume of estate agents on every high street? Is it different if you are a buyer or a seller.

A few years ago there was a giant called Findaproperty.com, which has now disappeared after a merger with Zoopla in 2012. The giants are now Rightmove and Zoopla. Nearly every high street agent must now list on these two giants to get the exposure to potential buyers or letters.

In times gone by majority of the advertising for property was in the freely distributed local newspapers, and newspaper could get a large amount of their revenues from estate agents. Now many papers exist in only online form or only sold in selected stores. This has meant that all that revenue is diverted to these online property listing sites. Within minutes of receiving new properties agents are able to list them online and mailshot them to potentials. As a buyer this means you have quick access but also quick competition.

DID YOU KNOW: 95% property searches are done online!

There are now a rise of many online only estate agents such as such as eMoov.co.uk, Housesimple.co.uk and Hatched.co.uk. Zoopla and Rightmove online allow estate agents to advertise, not private clients. Hence their is a market for online only agents. With minimal costs they can operate, some only charging £500 commission on property sales. Compared to the 2% average of traditional agents and London average house prices hitting almost £350,000. That’s a comparison of £500 vs £7000? What would you choose?

Are relationships with your estate agent important?

This question goes hand in hand with the debate of using online only estate agents or not. In years gone by your relationship with your local agents were of prime importance. Whether you were a seller or a buyer your agent could significantly improve your chances of succeeding in a transaction or even giving you first option ahead of others.

Recently working on a deal for a client we realised the importance of this relationship is still as valid as ever. You pay a price but you get that call ahead of a property being listed online. Or as a seller they personally take care of negotiations and vetting to squeeze every penny from the prospective buyer. It brings about a personal touch an art that is often lost in today’s technologically reliant world.

Spoilt for choice? But which one?

Since the before the bubble burst till now there have been more and more new estate agents cropping up on every high street in the country. Even when the market for buying and selling was stagnant they were opening. Mainly for the high demand for lettings and the quick 6-10% that they could make by flooding landlords with sub standard tenants and then in an few months they disappeared. Estate agency requires no qualifications to open, so there is easy entry. But do not discount them all the new boys on the market. There are some very good ones. Best advise is to go and have a conversation, you very easily can weed out the all talkers and the ones with extensive local knowledge.

The best agents we find are ones that have been in an area for a while, they get the best properties first and they also have the ready clients who are looking.

Difference for Buyers and Sellers

For buyers:
Walk around the area you are looking and register interest with the local estate agents. They will give you inside knowledge of the happenings and developments locally and can give you first option. You are not generally paying anything so it makes no difference to you.

For sellers:
You are the one paying fees so this is the big dilemma. Also it depends on your circumstances, how long you can wait to find a buyer, can you handle viewings. A good agent can vet out prospects so there is less hassle for you, especially if you are selling your residential home and do not want hoards of random people turning up to see.

Conclusion

Estate Agents are massively important for the buyer and seller, however each situation is different. On the whole good relationships enable you to get preferential and personal service that can help you beat the market.

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Property Highlights

Capital Gains Tax loophole closed

From April 2015, overseas investors will face a capital gains tax bill on any profits they make from UK property. It is only fair to make overseas investors pay capital gains tax (28%) on the profit they make when they sell their UK properties. That is what British second homeowners are required to do, so why not foreign investors too.

£1bn made available for property development loans

£1 billion of loan money is to be made available to councils wanting to fund new housing developments in Manchester, Leeds and elsewhere (expected to create 250,000 homes). House building is up by 29% on last year. It is a figure warmly welcomed by construction firms such as Persimmon, Barratt and Taylor Wimpey, though many large financial firms such as L&G insist house building should be a much higher and more urgent priority.

Aim to keep interest rates low

The aim of many tight regulations in banking and financial industries is to encourage responsible lending and so it is possible to maintain low interest rates. This is vital to the general economy and must be fought against rising house prices. So house prices will need to be kept under control.

What does this mean for a property investor?

Firstly if you are a foreign investor then much of the benefit you got have been diminished. However if you are not, this is great news. It will mean that foreign investors may start to put there money else where. This means there will be less competition from “Cash Oversea’s buyers” when you are after a property. Prices should also correct accordingly. Overall a good policy for UK property buyers and also the increased tax revenue will help the public too.

Funding for house building and developments will increase housing supply and keep construction jobs strong. However will this only benefit the house builders who sell at inflated prices? Possibly. The impact on the normal UK property investor will be minimal.

Low interest rates are welcome for investors, however it depends if new finance is available. Overall it will at least mean that investors’ current mortgage payments stay low.

The UK property bubble is building

The average family home is up £5,583 and London properties have increased by more than £7,000.UK property prices went up by £7,430 in October

Average sale price in London is now £404,199

Help to Buy scheme is inflating prices

Rents increase 11% to £785pm, 41% of the average UK wage.

In London, where the average sale price is higher than ever, 14 people compete for every property.

Mortgage applications rose by 6% in October, and almost double 2012 numbers. It comes as the Council of Mortgage Lenders said last week the number of homes sold this year will be more than one million for the first time since the financial crisis began in 2007.

Out of the 5,375 sold so far, the highest number of Help to Buy sales have been in Leeds, Wiltshire, Milton Keynes and Reading.

The average price of a UK property bought under the Help to Buy scheme was £194,167, with an average equity loan of £38,703.

Critics warned the UK-wide second phase of the scheme, which began last month and is not restricted to new-builds, would cause a housing bubble.

It guarantees 15 % of the value of the home loan.

After almost coming off the market, Buy to Let mortgages are also being approved strongly. Landlords and investors are buying up and completing deals to keep up with the increasing rent demand and to cash in on the rental increases. This is a very encouraging sign for property investment.

However as the final graphic shows there is still not enough supply in the market, especially in London where there are almost 3 offers for every sale.

PropVestment’s thoughts

Yes the UK property market is picking up and in fact picking up a little too fast. But this is mainly due to the Help to Buy scheme which is resulting in unrealistic implications on price and the market. The only ones to benefit are the banks and house builders. First time buyers, buying under the scheme face higher interest rates compared to traditional mortgage products. The market right now is too competitive and sellers can take advantage. We do however have concerns that many first time buyers under Help to Buy will suffer from negative equity in years to come once the Government pulls the plug on the scheme and prices fall back to their realistic, natural and sustainable level.

Student Housing: Is it a good investment?

This week Savills published their student housing report. Here are some key findings from that report and some of personal experience and observations from working with our clients.

“Student housing continues to perform well as an asset class with higher yields than both residential and commercial property” – Savills

In the past the student market has been steered clear by investors due to the reputation of how students treat your property. However in recent years and the massive influx of students, the shortage in student housing has created a market where the returns are far higher and secure than residential and commercial property.

According to HESA between 1999 and 2012 the number of full-time students in higher education grew by 540,000, an increase of 46%.

With university halls of residence just about able to cope with the increasing numbers of first year students and private sector student accommodation operators racing to scale up, most students ended up in the private rented sector.

Many landlords ceased the opportunity, some to accommodate for their own children and their friends. The use and availability of Buy to Let mortgages made it even easier.

Where to invest in Student Housing?

According to Savills, Bath, Brighton, Bristol, Cambridge, Cardiff, Edinburgh, London, Oxford and St Andrews are at the top of the list for investors.

PropVestment’s clients have shown interests in south coast universities like Southampton and Portsmouth. In the past favourites have included Manchester and Nottingham and of course London, with investments south of the river.

Demand for Student Housing & increase in Fees?

It was thought that student numbers would fall after the fees jumped to a maximum of £9,000 from 2012. But this only applied to domestic students.
In 2013 demand from within fell by 2.7%, However, demand from outside of Europe has continued to grow during this period, particularly from the Far East, which has seen average annual growth of 8.5% over the last 6 years.

The overall 0.4% fall in domestic student numbers between 2010-11 and 2011-12 was counterbalanced by a 1.7% increase in international students keeping student numbers
fairly stable.

Is London still the place to invest?

London has 300,000 full-time students, and 110,000 part-time students. It is the student
accommodation market is both the largest and most active in the country.

With private sector rents forecast to continue growing, affordability for domestic students,
who make up 75% of the student body, will continue to be stretched and drive demand
into surrounding more affordable markets.

Therefore there is much opportunity in Zone 1 and Zone 2 areas of London. However in London there are many other factors that also effect the market.

PropVestment Top Tips

Invest and convert larger properties into HMOs to house multiple students. The returns are higher for the landlord, and the greater space can provide more affordable alternatives for students rather than renting a studio on Oxford Street.

Mortgage approvals help property market activity

Mortgage lending jumped 21% in May, the sharpest rise since October 2008, suggesting Britain’s housing market once again has a spring in its step.

The Council of Mortgage Lender’s gross lending figures, which reveal the value of loans advanced without taking into account repayments, showed £14.7bn of mortgages were taken out during May, up from £12.2bn in April. The figure was also 17% higher than the £12.6bn seen in May 2012, aided by government schemes to boost lending.

Does this mean the Funding for Lending and Help to Buy schemes are working?

PropVestment’s client have had experiences that surprisingly agree, however there seems to be discrepancies across lenders.

One client of ours had a mortgage approved in principle by Santander. He had good credit, was buying below value and was putting in 30% of the money himself too. After two months waiting for Santander to send a surveyor over to value the property, a job most of us could do using Land Registry and Zoopla data, Santander say they have had a re-think and do not need a surveyors report. Santander pulled the plug.

Fortunately this deal was not part of a chain, and the seller was understanding. However due to poor business practises Santander could cost the industry dearly.

Our client returned to us, we put him in touch with our favoured mortgage broker, who went to the Halifax. Halifax approved, surveyed and letter of offer within 7 days.

We were surprised at the speed of response of Halifax. Previously we have not had such good experiences with the government owned banks since the credit crunch. LloydsTSB part of the HBOS group has usually been responsive with Natwest and the RBS group being the worst. Our client’s experience and a few others we have heard with Santander now put them firmly on the unfavoured list.

Money talks in this industry, if lending is available without unnecessary hassle, any bank will gain a strong reputation and foothold in the market.

We welcome your thoughts on the topic of lending in the property market and inparticular perspectives from other parts of the country. Email info@PropVestment.com

If you are having trouble getting finance for your property, we have a great range of mortgage advisers that can assist you.

-Do I have to be a first time buyer?No, this scheme is available to all, not just first time buyers

-How does it work?The Government will lend you up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of your home…so you will only need to secure up to a 75% mortgage from a bank or building society. It is interest-free for 5 years

-When does it start?The scheme is available from 1 April 2013. It will run for 3 years and provide £3.5billion of additional investment

Option 2 – Help to buy – Mortgage Guarantee

-Is it applicable to any property?
New build and existing homes

-Will I need a deposit?Yes, you’ll need a minimum of 5%

-Is it only open to First Time Buyers?No, it is also open to existing homeowners

-How does it work?You’ll need to secure a mortgage for your purchase. The Government guarantee should help encourage lenders to offer better access to low-deposit mortgages

-When does it start?Available from January 2014, this scheme will run for 3 years

-Is there a maximum purchase price?Maximum value £600,000

Other points from the Budget 2013:

21 % corporate tax rate – potentially beneficial to buy rental properties into a company rather than private names

Encourage to convert unused commercial space into residential

London Mayor, Boris Johnson has also secured £750 million for new build housing in the capital. This will boost affordable housing for middle income Londoners.

PropVestment’s thoughts

Overall we believe that the budget is progressive for the UK Property market, however it could have done more. However it seems that Help to Buy is more universal and will help more of the population. It is now for us to see how it filters through in reality. Many other schemes like NewBuy and FirstBuy have been less successful

Contact PropVestment today for a chat, we advise on all property investment queries. Lets make money from property

Stringent lending stopping property investment

It has been a long standing observation that one of the main reasons the UK property market is struggling is due to the lack of funding in the market place.

We have had a series of funding schemes proposed by the government and other institutions to encourage property investment. These include the likes of NewBuy, FirstBuy, and Funding For Lending.

Funding for Lending is the latest scheme to encourage lending where the banks can borrow cheaply provided they lend it out to the public, be it as mortgages or commercial lending.

FirstBuy and NewBuy is primarily restricted to new builds, which benefit constructors but represent a very small proportion of the property on the market.

Over the last few weeks at PropVestment we have been working on a deal for a young professional first time buyer. However we have it a brick wall with strict, inflexible, non-subjective lending criteria by all the major lenders.

*Due to confidentiality and to protect our exclusive property sources, details on this article will be disguised

Each leaseholder has spent almost £40k for new concierge, lifts, windows

20th floor with views of London, from the Gherkin, Canary Wharf, O2, Shard, all the way to Crystal Palace.

Large Balcony. Full wall to wall windows across all rooms.

118 Year Lease

Rental expectation – upto £1500 per month currently. PropVestment predicts this will hit £2000 in 5 years. Strata building demands this level for smaller compatibles.

Asking price – £220,000

Gross Yield is over 8%

If lending 75% Purchase Price, there for deposit £55,000
If mortgage at 4% repayment over 20 years £1011 installment per month
Surplus for Buyer after mortgage £5868 per annum.10.7% return on cash invested annually

The First Time Buyer

Mid twenties

£50,000 savings, plus £10,000 promised contribution from family

£40,000 a year salary before bonus.

Over £2000 monthly saving after expenses

City working professional, currently living with parents

Buying either to stay in and share or rent out fully.

Why the banks won’t lend?

Ex-council

Concrete & Steel Construction

If the councils have approved a £40 million refurbishment of the block, clearly there is no risk to the building. Considering most of the block is still council owned they would not put so much of their own money in an unsafe building.

Being Ex-council ensures that maintenance is always prompt and reasonably costed.

The banks have very little risk here because the rental will cover the mortgage repayment by 135%, the usual criteria for Buy to Lets is currently 125%.
The buyer has £2000 disposable income every month, for any major shortfall or unforseen circumstance.

PropVestment’s Thoughts

After all this and almost a model buyer, why are the banks not lending?
Banks are given cash via the Funding for Lending scheme and still are not making it available to the public.

By the banks not lending, we, as in property professionals, end up having to offer such properties to cash buyers from abroad.
Ideally we want young property owners from the UK, however due to the circumstances the only investors that can afford to pay full cash are foreigners. This means that the profits also get taken out and do not recirculate in the UK economy.

The government must do something to ensure banks lend to boost UK home grown property investment.

For any property investment advise, analysis, deals or thoughts, contact us today for a no obligation chat. Sharing thoughts and ideas is how we progress.

http://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpg00Niravhttp://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpgNirav2013-02-28 15:08:122013-02-28 16:56:07Lending holding back property investment in London

Interesting observations from property auction

This Valentine’s day, Thursday 14th February we attend the Allsop Residential Property Auction in London’s Cumberland Hotel. Never have we seen such a packed out property auction room, it is not a small venue however felt more like a cattle market.

As usual we will bring you some facts of what sold and what did not sell in the property auction, as well as what properties were bargains and what were bank busters.

Key observations include the expected high priced sales in London in particular in area such as Kensington, Chelsea and Fulham. Properties in North of England did not sell well with most of those present in the auction purely focused on London property. Finally a surprise observation was that of ground rents. These seem to be longer term but much more secure investments, with the bonus potential when it comes to extension or other approvals.

There were many regulated tenancies, therefore sold much below the vacant value of such properties. There was a great deal of lots that were for the unconventional investor.

Property Auction: The numbers!

The Allsop Residential Property Auction featured 288 lots, therefore it was not possible for PropVestment to stay for all. We stuck around until Lot 87, which really meant 72 active lots, with 19 withdrawn or sold prior.

Out of 72 lots, 56 sold with 16 where the Reserve was not met. 78% Success

Average highest bid was £287k but the average selling price was £237k. Average unsold lot highest bid was £459k. This shows that the higher value lots struggled, with sellers keeping higher reserves.

Average sold lot was 27% higher price than the guide. Where as the average reserve not met lot was 3% under guide.

Residential Property Auction Bargains

Lot 76 – Freehold Public house in Wiltshire with a 9 year commercial lease at £24k rising to £25,880. Sold for £180k…. 14.4% Yield…pays for itself in under 7 years

Residential Property Auction Bank Busters

Lot 32 – £1300 Ground rent investment, Sold for £54k, and the leases are 124 years to run, only 2.4% yield

Lot 23 & 24 – Ground rent investment in South Kensington, £2k and £2.4k per annum respective and went for £235k and £460k respectively. However there were flats in the buildings with under 25 years lease left. So the value is instilled with these rather than the ground rent income.

Lot 53 – Commercial with 11 years lease, and flat on regulated tenancy in Dorset. Sold for £181k, currently yielding 6%

Property Auction Final Say

Property auctions still seem like a great place to sell, especially if the property you own is not finance friendly. Meaning that traditional buyers will falter at a mortgage stage. There is a lot of auction activity at the large auctions but there is a massive bias to London.

PropVestment can help you vet potential investments and guide you to make the right choices for selling or buying property in auction. The property market is changing and you need to be fully informed prior to any decision.